Auckland Airport boss upbeat about future but warns against complacency

Auckland International Airport chief executive Adrian Littlewood is upbeat about the future despite signs of softening traveller numbers, but warned against complacency.

The country's biggest airport registered a record 21.1 million passenger movements in the June 2019 year, up 2.8 percent from a year earlier. That aligns with Stats NZ figures showing a 2.7 percent increase in New Zealand's short-term visitor numbers in the same period at 3.9 million.

"If I look longer, or even medium term, we still remain very confident in tourism market potential," he told BusinessDesk.

However, "we have to be realistic. I think the signs are certainly that things are softening, particularly on the domestic front and that's real. We need to recognise that," he said.

The airport operator's underlying profit after tax of $274.7 million for the year ended June 30 was at the top end of guidance, and revenue lifted 8.7 percent to $743.4 million. However, it's forecasting flat earnings for the 2020 year, accounting for the rising cost of a major infrastructure programme and slowing passenger growth.

Against that backdrop, "the worst thing you can do is lean back and say it's happening to everyone and that's what it will be. It's times like this we need to double down," said Littlewood.

"I think the really important thing for our country is that we don't accept a cycle as something that just happens to us, we actually do something about it," he added.

Among other things, New Zealand needs to focus on "going after those high-end travelers, who spend a lot of time in our country, and really put our best foot forward. We've got to be relatively better than our next best competing destination."

Littlewood said the airport is doing its part with more than $1 billion of capital spending underway as part of a multi-billion dollar project to revamp the airport.

Of eight so-called anchor projects, two are currently in progress and include an airfield expansion and a major upgrade of the inner core of the airport's roading network. The next project to kick off will be a new international arrivals terminal, a new domestic terminal and a new multi-level car park, he said.

"This is the time we need to be investing toward our future because the cycle will turn and we want to have the right project, the right infrastructure to support that," he said.

Littlewood said news the central bank cut the official cash rate by 50 basis points to a record low 1 percent earlier this month "will certainly make people feel more willing to hopefully invest. This is certainly something we are doing."

He did sound a note of warning, however, about capacity constraints. The construction sector as a whole has faced a range of capacity-related issues, including shortages of skilled and unskilled labour.

"This is something we monitor very closely. It is something we are generally concerned about," Littlewood said. He noted there is a huge number of national assets that need an upgrade or expansion for capacity and "we need the people to build it."

In this year's budget, the government added $6 billion to its borrowing programme over the next five years to cover a shortfall in its cash flow to meet $41.8 billion of planned capital spending. It plans to ramp up spending in health and education infrastructure, which it says have been underfunded for too long.

Littlewood was upbeat about a new infrastructure commission being created by the Labour-led coalition to help improve planning: "You need an organisation that is able to look across these things."

Auckland Airport is "closely tracking" projects that are wrapping up, in Auckland in particular, and aiming to "hit our timing well, so we can match that capacity as it comes into the market," he said.

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